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Labour Economics > Labour Market Equilibrium > Flashcards

Labour Market Equilibrium Flashcards

1
Q

What way does Black Death shift curve?

A
  • supply shifts back
  • assume no change in demand curve
  • destroys labour
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2
Q

If capital is a substitute for labour, after Hurricane Andrew does labour demand increase or decrease?

A

Increases
- supply curve for capital shifts back
-> increase in the price of capital

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3
Q

If capital is a complement for labour, after Hurricane Andrew does labour demand increase or decrease?

A

Decreases
- supply curve for capital shifts back
-> increase in the price of capital

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4
Q

What happens in the graph for Hurricane Andew where labour and capital are substitutes?

A
  • Demand shifts right
  • wages and employment rise
  • Assume supply does not change
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5
Q

What happens in the graph where labour and capital are complements?

A
  • Demand curve shifts left
  • wages and employment fall
  • labour demand decreases
  • assume supply does not change
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6
Q

What is Wf?

A

The total wage (including the tax) a firm pays per hour worked

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7
Q

What is Ww?

A

The wage a worker receives per hour worked.

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8
Q

Tax (t) =

A

Wf - Ww

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9
Q

What is deadweight loss (DWL) of the tax?

A

is the loss of revenue to firms and workers not offset by government

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10
Q

What is the burden for workers of a tax?

A

W0 - Ww

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11
Q

What is the burden for firms of a tax?

A

Wf - W0

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12
Q

What does a tax burden depend on?

A

It depends on the shape of supply and demand curves

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13
Q

demand curve drops by what?

A

the size of the tax

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14
Q

Who pays for the tax when labour demand is flat (elastic) and labour supply is steep (inelastic)?

A

Workers (suppliers of labour) bear more of the tax

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15
Q

Who pays for the tax when labour demand is steep (inelastic) and labour supply is flat (elastic)?

A

Employers (buyers of labour) bear most of the tax burden

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16
Q

Who pays for the tax when labour demand is flat (elastic) and labour supply is flat (elastic)?

A

the tax burden is shared equally between employers and workers

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17
Q

who pays for the tax when labour demand is steep (inelastic) and labour supply is steep (inelastic)?

A

the tax burden is shared between employers and workers

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18
Q

Is a steep line elastic or inelastic?

A

inelastic

19
Q

Is a flat line elastic or inelastic?

A

Elastic

20
Q

Who bears most of the burden?

A

The less elastic pays (the more inelastic)

21
Q

a payroll tax can be treated as what?

A

A negative tax

22
Q

S =

A

Ww - Wf

23
Q

Who benefits from a payroll subsidy?

A

most inelastic benefits (least elastic benefits)

24
Q

With a payroll subsidy what happens to the demand curve?

A

It shifts out by the size of the subsidy

25
Q

What is a monopsony?

A

a market in which there is a single buyer

26
Q

What is
monopsony power?

A

the ability of the buyer (of labour) to affect the price of the good and pay less than the price that would exist in a competitive market

27
Q

In a monopsony what supply curve does the monopolistic firm face?

A

the market supply curve

28
Q

Why does the monopolistic firm face an upward sloping supply curve?

A

in order to hire more workers, it must pay all workers a higher wage - no price discrimination

29
Q

what 3 factors does the degree of monopsony power depnds on?

A
  1. Elasticity of market supply
  2. Number of buyers
  3. Competition among buyers
    - there is an inverse relationship if 1,2 + 3 go up, monopsony power goes down.
    -> It is difficult to assert monopsony power
30
Q

Small value of (MEL - Wm*)

A

-> Not a lot of monopsony power
-> Elastic supply of labour

31
Q

Larger value of (MEL - Wm*)

A

-> Lot of monopsony power
-> Inelastic supply of labour

32
Q

what is the reason for a “shortage”?

A

Monopsony power, not a lack of nurses

33
Q

How not to fix a shortage?

A

Increasing the number pf nurses as it resulted in LOWER wages for nurses.

34
Q

Demand =

A

Marginal Product of Labour (MPL)

35
Q

Supply does not equal

A

Marginal Expense of Labour

36
Q

What does MPL mean?

A

Marginal Product of labour: the additional output generated by adding one more unit of labour

37
Q

What does Marginal Cost mean?

A

the additional cost incurred by hiring one more unit of labour

38
Q

If W*m < W min < W1 minimum wage increases or decreases employment?

A

Increases employment

39
Q

What does new marginal expense (cost) curve with the minimum wage mean?

A

To employ another worker after this you have to raise the minimum wage

40
Q

What does minimum wage radically change?

A

the marginal cost of another worker for the firm

41
Q

With a wage subsidy what way does the demand curve shift?

A

Demand curve shifts right

42
Q

With a wage tax what way does the demand curve shift?

A

Demand curve shifts left

43
Q

With a wage subsidy demand curve shifts out by the size of what?

A

By the size of the subsidy

Labour Economics (10 decks)

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